EUR/JPY Candlesticks and Ichimoku Analysis

The single currency traded in a relatively narrow range after early rise to 126.09 and base on the bullish ‘morning star’ candlestick pattern at the low of 112.08, we would stick to our mildly bullish view that a temporary low has been formed at 112.08 once a daily close above 126.09 resistance is materialized or a long white candle appears, this would add credence to this view and then correction to 131.02 would follow. However, 134.19, being a minimum 38.2 percent pullback of entire decline from 169.97 to 112.08 should be first resistance and 134.50/60 (current level of Kijun-Sen) is likely to limit upside and reckon 140.00 would hold from here. On the downside, initial support is located at 121.73 and expect 119.08 to remain intact and bring further corrective rise to aforesaid targets. Only a break of 114.90/00 would shift risk back to downside and re-test of 112.08, below there would extend major downtrend from 169.97 to 110.00, then 108.50/60 but 102.00 would limit downside and psychological support level at 100.00 should remain intact.

On the daily chart, euro has remained confined within the trading band of 121.73-126.09 and further sideways consolidation should take place this week, however, as price is now trading above the Ichimoku cloud (currently located slightly below 121.73 support), suggesting price shall break this range on the upside and the corrective rise from 112.08 low would resume. A breach of 126.09 would bring correction of medium term decline and gain to 128.00, then towards 131.02 resistance would be seen later.

On the downside, if price drops below indicated upper limit of Ichimoku cloud (121.56), this would defer this bullish scenario and weakness to 120.00 (app. current Kijun-Sen level) cannot be ruled out, however, only a clear break below the lower limit of Ichimoku cloud (Senkou Span A) at 119.02 would abort and indicate top has been formed, then fall to 117.00 n 115.50 would follow.